DE Nora India Ltd Management Discussions

ECONOMIC OVERVIEW

The global economy in 2024 25 is navigating heightened uncertainty amid persistent inflation, diverging monetary policy stances, and escalating geopolitical tensions. Global GDP growth is projected at 3.1%, with inflation averaging 5.2% due to ongoing conflicts and supply chain disruptions, particularly around the Red Sea. Advanced economies are maintaining high interest rates (~5%) to manage core inflation, resulting in softer investment and consumer demand. In contrast, emerging markets are expected to grow by 4.5%, driven by domestic consumption and infrastructure spending. Corporate performance has remained resilient, especially in technology, energy, and financial services, with global profits growing 6 7% and a rising focus on digitalization, supply chain diversification, and ESG investments.

India continues to demonstrate strong momentum, with GDP growth stood at 6.5% in 2024 25, supported by robust consumption, prudent fiscal management, and increased public capital expenditure (~2.3% YoY). Corporate India is buoyed by rising credit demand, strong consumer sentiment, and low debt levels. Private investment grew is projected to grow by 8%, while profitability remains healthy across key sectors like manufacturing, infrastructure, IT, and financial services. The Reserve Bank of India maintained the policy repo rate at 6.5% through FY 2024 25, balancing inflation control with the need to support growth. Overall, both globally and in India, corporate and investment trends reflected resilience amidst uncertainty, with businesses focusing on efficiency, digitalization, and sustainability to sustain growth in a challenging macroeconomic environment.

COMPANY OVERVIEW

De Nora India Limited (DNIL), a key player in the electrochemical sector, primarily serves the chlor-alkali industry through the manufacture and recoating of anodes and cathodes used in the electrolytic production of caustic soda and chlorine critical components in a wide array of industrial and consumer applications. The Companys product portfolio also includes LIDAR anodes for cathodic protection, platinized titanium and GREENCHROME anodes for surface finishing, and electrochlorination systems for water disinfection. Backed by proprietary technologies from its parent, Industrie De Nora, DNIL holds a prominent market share in India and continues to provide advanced technical and process support to its customers across electrolytic industries.

In FY 2024 25, DNIL navigated a challenging macroeconomic environment marked by geopolitical tensions, pressures, and supply chain disruptions. These factors have had a material impact on the Companys financial performance, leading to a significant decline in profitability. Despite this, DNIL remains committed to its long-term vision of delivering sustainable, innovative solutions to meet evolving industrial and environmental needs. The Company continues to draw strength from its global operational resilience, and dedication to customer satisfaction, positioning itself to rebound as conditions stabilize.

DE NORA GROUP

Industrie De Nora S.p.A. (hereinafter the "Parent Company" and together with its subsidiaries the "De Nora Group") is a joint-stock Company incorporated and registered in Italy. The registered office of Parent Company is located at Via Bistolfi 35, Milan (Italy). On June 30, 2022, the parent Company completed the process of listing its ordinary shares on Euronext Milan Market. De Nora group is celebrated its centennial year in 2023.

De Nora Group prides itself of 100 years in the electro-chemical industry. It was hundred years ago in 1923 when our founder Oronzio De Nora became an electrochemical entrepreneur and founded De Nora Group. Electrochemistry wouldnt have been the same if Oronzio De Nora hadnt had the visionary intuition which brought him to register his first patent in 1923. Today De Nora Group, specializing in electrochemistry, is known as a leading global player in sustainable technologies and is a world leader in the supply of technologies for the production of chlorine and caustic soda and the largest supplier of electrodes for the electrochemical industry.

INDUSTRY STRUCTURE AND DEVELOPMENTS

The chlor-alkali industry in India is an important component of the basic chemicals industry. Caustic soda, chlorine alongside hydrogen, soda ash and hydrochloric acid comprise the chlor-alkali industrys components. These chemicals find their applications in several industries such as textiles, chemicals, paper, PVC, water treatment, alumina, soaps & detergents, pharmaceuticals, glass, chlorinated paraffin wax, among others. The various technologies, which are being used in the chlor-alkali industry, include mercury, membrane cell and diaphragm cells. In India, membrane cell technologies are widely used for caustic soda production.

Most of the modern medicines today rely on chlor-alkali chemistry for part of their production process for which is likely to favour ancillary industries of chlor-alkali. Chlor-Alkali industries are adopting upgraded membrane cell zero-gap technologies to reap benefits of lower power consumption per ton of caustic produced for ex: nX-BiTAC & BM2.7v6plus electrolyzers DNIL is also the leading service provider of anode and cathode elements used in these latest zero gap technology membrane cell electrolyzers. DNIL performs recoating and mechanical repairs to the anode and cathode half shells and with zero gap solution to cathode structure used in the membrane cell technology of the chlor-alkali industry. The dynamics of the chlor-alkali industry has a considerable effect on the overall performance of the Company.

DNIL is the industry leader in technology and in this continuing challenging environment DNIL has made extra efforts to keep cell technology competitive by reducing power consumption and is continuously redefining its business model to maintain margins and to best deliver value to its stakeholders by ensuring continuous improved productivity and good financial performance.

OPPORTUNITIES AND THREATS

The Goa factory is equipped with all the necessary equipment and facilities to meet the demands of the chlor-alkali industry. The Company continues to remain the market leader in the chlor-alkali and cathodic protection systems business. We aim to further strengthen our presence in this strategic area. The main activity of the Company is dependent on recoating electrodes for membrane cell electrolyzers in chlor-alkali plant, which is cyclic in nature because the life of the coating lasts for 6 to 8 years. The income from recoating business contributes a major share in the Companys total income. The mercury cell plants have gradually been converted to membrane cell plants. The Company does not get the business of anode/ cathodes coating at this conversion stage since these are inbuilt in the new cells and the complete set of cell elements are imported by the customers. The Company is not in the business of manufacturing membrane cell elements and the recoating business in respect of these anode/cathodes will happen only after 8 years.

The chlor-alkali market in India is undergoing consolidation in recent past & entry of newer technology suppliers has put the Company in more challenging environment to continue to maintain its market share.

SEGMENT WISE OR PRODUCT WISE PERFORMANCE

In accordance with the requirements of Ind AS 108 Operating Segments, the Company has identified Electrode Technologies as its only reportable segment. This decision has been taken by the Chief Operating Decision Maker (CODM), considering the nature and scale of the Companys operations. For the financial year ended March 31, 2025, the Company has recorded a gross turnover of 6,858.24 lakhs from the sale of its products. Accordingly, the financial results have been presented for a single segment, and no separate segment information is disclosed.

OUTLOOK

The outlook for De Nora India Limited remains positive, driven by strong fundamentals within the Indian caustic soda industry and the Companys leadership in electrochemical technologies. The domestic caustic soda sector continues to operate in a long position, with capacity additions outpacing demand growth. As per the Annual Industry Review 2024 25 by AMAI, the industry is projected to grow at a CAGR of approximately 6.7% from FY 2022 23 to FY 2027 28, supported by steady consumption from end-use industries such as textiles, alumina, pulp and paper, and pharmaceuticals. This trend is expected to generate sustained demand for advanced maintenance and service solutions in the chlor-alkali ecosystem.

In this environment, De Nora India Limited is well-positioned to leverage its niche capabilities in membrane recoating and cathodic protection systems. The Company continues to hold a strong market position in India and is actively expanding its presence across South East Asia, which remains a key growth region. With capacity expansions across the chlor-alkali sector, there is a growing need for reliable, efficient, and high-quality technical services an area where DNIL has built a reputation for excellence. The Company remains focused on innovation, process optimization, and customer-centric service delivery to maintain its competitive edge.

Additionally, increasing environmental regulations and the growing emphasis on operational safety across the chemical industry are likely to drive demand for De Noras specialized offerings. While external factors such as energy cost volatility and chlorine management challenges persist in the industry, DNILs commitment to sustainable practices and its technical expertise position it well to navigate these headwinds. Overall, the Company is optimistic about its growth prospects in FY 2025 26 and remains committed to delivering value to stakeholders through operational excellence and strategic expansion.

RISKS & CONCERNS

Risk management remains an integral part of DNILs business framework and is deeply embedded across all operational and decision-making processes. The Company has instituted a comprehensive Risk Control Matrix to monitor, evaluate, and address key risk exposures. The framework is regularly reviewed by the Board of Directors and the Audit Committee, while the Senior Management team led by the Managing Director takes responsibility for proactive mitigation and implementation of appropriate control measures.

During FY 2024 25, the global business environment was marked by persistent volatility due to a range of external risks. The prolonged Russia Ukraine conflict, combined with geopolitical instability in other regions, has led to economic slowdown in several developed and emerging economies. These macroeconomic challenges may impact global chlorine-alkali investments and, in turn, affect downstream service demand from key customers in India and South East Asia.

Supply chain risks remain another key concern, particularly with respect to the availability of critical raw materials, extended lead times for imports, and fluctuating import policies in India. These factors can impact project timelines and operational efficiency. In addition, volatile raw material prices especially for materials sourced internationally can affect the Companys input costs and margins, despite the service-oriented nature of its business.

The Company is also exposed to risks arising from changes in environmental and regulatory frameworks. Increasing compliance requirements across global markets, including enhanced scrutiny on industrial effluent and emissions, require DNIL to continuously align its offerings with evolving standards. Any delay in compliance, or inability of customers to meet these standards, could indirectly impact service volumes and project schedules.

Additionally, the longer duration between service cycles for membrane elements creates revenue concentration risk, as DNILs recoating operations rely on a relatively small number of high-value projects, which are often deferred or advanced based on customer-specific timelines. In this context, any postponement of scheduled recoating or plant maintenance activities by clients may significantly affect short- to medium-term revenue visibility.

The risk of technological disruption also persists, as emerging trends in electrochemical systems, automation, and digital monitoring may alter traditional service models. While DNIL continues to invest in innovation and operational improvement, staying ahead of such technological changes remains an ongoing priority.

In conclusion, while the business is exposed to both cyclical and external risks, De Nora India Limited has established a structured approach to risk identification and mitigation. The Company remains confident in its ability to manage these challenges through prudent planning, strong customer relationships, operational efficiency, and a disciplined risk management framework.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The responsibility for establishing and maintaining adequate internal control lies with the Management of the Company. This internal control mechanism comprises a well- organization, which undertakes time bound audits and reports its findings to the Audit Committee, documents policy guidelines and determines authority levels and processes. The Company also has an Internal Audit function to provide reasonable assurance regarding the effectiveness and efficiency of operations, safeguarding of assets, reliability of financial records and reports and compliance with applicable laws and regulations. To ensure and review the effectiveness and implementation of the systems and operations, the Audit Committee regularly reviews them, and further initiates corrective actions wherever deemed necessary.

The application systems for the business is backed by an integrated SAP Accounting System which provides complete integration of all transactions including financial transactions and statements. Processes and systems are subject to Internal Audit through an annual internal audit plan approved by the Audit Committee. These are further supported by the Statutory Auditors who validate that the financial reporting is true and fair. The results of all audits are discussed with the Senior Management and reviewed by the Audit Committee on a quarterly basis.

FINANCIAL PERFORMANCE

The financial results of operations of the Company for the year under review are detailed in the Directors Report. As per the same, the Companys operations have resulted in a pre-tax profit of 275.56 lakhs for the current year as against 2,522.47 lakhs for the previous financial year. The post-tax profit for the current year is 169.29 lakhs whereas it stood at 1,900.74 lakhs for 2023-24. The Earning per Share (EPS) (Basic & Diluted) of your Company for the financial year ended March 31, 2025, was at 3.19.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

Key Financial Ratios	FY 2024-25	FY 2023-24	Change Reason/ Explanation (%)
Debtors Turnover Ratio	5.80	5.42	7% -
Inventory Turnover Ratio	0.94	0.89	5% -
Interest Coverage Ratio			Not applicable as company is debt free.
Current Ratio	4.97	14.48	-66% Provision for warranty during the year impacting the ratio.
Debt Equity Ratio			Not applicable as company is debt free.
Return on Net Worth (%)	1.19%	15.01%	-92% Margins impacted due
Operating Profit Margin (%)	5.99% -	33.4%	-88.01% to rise in operating cost and warranty provision
Net Profit Margin (%)	2.47%	25.76%	-90%

MATERIAL DEVELOPMENT IN HUMAN RESOURCES/ INDUSTRIAL RELATIONS

At our company, we believe that a healthy and inclusive work environment begins with prioritizing the physical and mental wellbeing of every employee. This focus not only enhances individual quality of life but also fosters motivation, engagement, and a strong sense of belonging within the organization. In addition to promoting wellbeing, the company is equally committed to enhancing the skills, knowledge, and capabilities of its workforce through continuous learning, training and development initiatives. Together, these efforts create a culture of growth, resilience, and shared success. Some of these initiatives are as below:

De Nora Step challenge: De Nora India participated in the De Nora Groups Global Step Challenge- an exciting initiative aimed at promoting health and environmental sustainability. Using an app, employees teamed up with colleagues at their locations to compete against teams from De Nora sites across the world. The objective was simple yet impactful record the highest number of steps. Were proud to announce that De Nora India won the reward for the highest participation rate, demonstrating our teams exceptional enthusiasm and commitment.

This fun and engaging challenge not only encouraged fitness and team spirit but also contributed to a greater cause. For every participant registered, De Nora pledged to plant a tree in collaboration with the Eden Reforestation Project, supporting global reforestation efforts. The challenge concluded with the recognition of the most active teams and individuals, celebrating their dedication to wellness and sustainability. De Nora India is proud to be a part of this initiative that aligned personal well-being with our commitment to the planet.

Safety Week Celebration: At our organization, workplace safety is not just a priority its a core value. This year, we proudly observed National Safety Week from March 4th to 10th, continuing our commitment to fostering a culture of safety. As part of the celebrations, a poster-making competition on the theme "Safety at Work" was organized, drawing enthusiastic participation and creativity from employees.

The impressive artworks served as powerful reminders of the importance of staying vigilant. Beyond the celebration, we have introduced several proactive safety measures across our plant to help prevent incidents and ensure a secure work environment for all. Our focus remains firmly first on continuous improvement and fostering a safety- mindset.

Yoga Therapy Consultation: To further strengthen our focus on employee health and wellness, we engaged an Industry Wellness Consultant and certified yoga therapist to provide specialized support for Musculoskeletal Disorders (MSDs). Employees received personalized guidance and therapeutic yoga practices aimed at both managing and preventing MSDs. This initiative reflects our holistic approach to wellbeing, ensuring our teams not only feel better physically but are also empowered to take charge of their long-term health. Its another step toward building a balanced, healthier workplace.

Ergonomics Awareness Session: A comprehensive training session on workplace ergonomics was conducted by a seasoned physiotherapist with over 13 years of experience. The session focused on the importance of maintaining proper posture and ergonomic practices at work, helping employees understand how small adjustments in their workstation setup and posture can significantly improve comfort, health, and productivity.

International Womens Day: We believe that building an inclusive workplace begins with recognizing, respecting, and celebrating diversity. On the occasion of International Womens Day, our company reaffirmed its commitment to gender equality and empowerment. A heartfelt celebration marked the day, including a cake-cutting ceremony that brought everyone together to honor the contributions of women across the organization. Through this and other efforts, we strive to create an environment where everyone feels seen, supported and empowered to reach their full potential. Together, we move toward a more equitable and united future.

Generative AI: De Nora is actively promoting the responsible use of Generative AI by issuing a dedicated policy, conducting pilot projects and now rolling out training sessions on using Microsoft Copilot effectively. These initiatives aim to boost individual productivity while ensuring data security and ethical AI usage across the organization. As on March 31, 2025, there were 45 permanent employees on the rolls of the Company.

Employee & Industrial Relations

The Company continued to maintain a cordial and harmonious relationship with all its employees. Any concerns that emerged during the year were addressed and resolved amicably through open and constructive dialogue with the workmen. The year remained free of any untoward incidents, reflecting the positive workplace environment. The Company also fostered active participation from employees and the union in initiatives aimed at enhancing both productivity and product quality. The HR team remains focused on driving high productivity, ensuring employee satisfaction and sustaining motivation across all levels of the organization.

KMPs/Senior Management Personnel & Other Staff

As recommended by the Nomination and Remuneration Committee (NRC), the Board has adopted a Remuneration Policy for KMPs/Senior Management Personnel. The remuneration is recommended by the NRC based on factors such as industry benchmarks, the Companys performance vis-a-vis the industry, performance/track record of the KMPs/Senior Management Personnel. The Remuneration paid to other staff is based on the grade, role and position in the Company, the experience, qualification, skills and competencies of the related employees. There exists a global Compensation System (CS), led by human resources, which is set with the aim of: being competitive to attract and retain talents on the local job markets where DNIL operates. paying fairly for accountability and on merit rewarding solid and outstanding performance, i.e. people results.

The objective is to ensure that the compensation motivates the employees to give their best performance.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE STRATEGY

Environmental, Social and Governance factors (ESG factors) are at the core of De Noras values and strategy and represent a long-term commitment that the Group intends to strengthen through several initiatives and projects. We believe that every step we take can have a positive impact on shaping a cleaner future, at DNIL we have done some changes in packing procedure of shipment to eliminate/ minimize usage of thermocol.

CAUTIONARY STATEMENT

Statements in this ‘Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations, plans or predictions or industry conditions or events are ‘forward-looking statements within the meaning of applicable laws and regulations. Actual results, performance or achievements could differ materially from those expressed or implied. Important factors that would make a difference to the Companys operations include demand-supply conditions, raw material prices, changes in government regulations, tax regimes, economic developments within the country and outside the country and other factors such as litigation and labour negotiations.